Cross-border mergers with a UK company post-Brexit

Britain is scheduled to leave the EU – with or without a formal exit deal – on 29 March 2019. It is therefore likely that, after that date, there will be significant legal implications for businesses with UK companies in Belgium, although the actual impact will depend on how the Brexit deal is negotiated: a transitional deal or a no-deal ('hard') Brexit.

However, the impact of either a transitional or a no-deal Brexit on cross-border mergers depends on whether the existing UK legislation on cross border mergers will fall away on exit. From a purely Belgian law perspective however, cross-border mergers will remain possible.

Under EU law, Belgian companies can merge with other Member State companies under the provisions of the Cross-Border Mergers Directive 2005/56/EC. In Belgium, the Directive was implemented by the Act of 8 June 2008 (Wet van 8 juni 2008 houdende diverse bepalingen (I) / Loi du 8 juin 2008 portant des dispositions diverses (I)) and introduced articles 772/1 to 772/14 on cross-border mergers into the Belgian Companies Code. Note that a New Companies Code has been voted on 28 February 2019. However, the articles 12:106 to 12:119 New Companies Codes does not provide for changes in the principles set out in the above articles of the Belgian Companies Code.

The (New) Companies Code does not define the cross-border nature of mergers, nor does it limit its provisions to mergers involving companies subject to Member State laws. In principle, this means that the provisions of the (New) Companies Code apply equally to cross-border mergers with non-Member States and therefore also to UK companies post-Brexit. However, cross-border mergers with a non-Member State will not benefit from the tax neutrality regime.

Furthermore, article 113 of the Code of International Private Law allows a Belgian company to merge with a foreign (non-EU) company, with the merger governed by the lex societatis of each of the companies involved. In terms of the merger process and protection of creditors, bondholders, shareholders and employees, the law of each jurisdiction will apply to the part of the merger that takes place in the respective territory of that jurisdiction. In other words, each company involved in the transaction is subject to the law applicable to its seat¹.

Therefore, provided that UK law does not change significantly post-Brexit, a cross-border merger between a Belgian and UK company should still be possible after (a hard) Brexit. However, the UK's Companies House currently mentions on its website that "any cross border merger involving UK companies must be completed and registered before 29 March 2019. After this, cross border mergers will no longer be able to take place".

If the UK's legal framework would indeed fall away after Brexit, from a UK law perspective, cross border mergers with Belgian companies will not be possible after Brexit.

¹ Reproduced from Practical Law with the permission of the publishers. For further information, visit www.practicallaw.com